Costs rising in Cingular network upgrade
The amount the wireless carrier will spend to upgrade its cell phone network to offer higher-speed service may have ballooned by as much as $1 billion.
The company, the nation's second-largest wireless provider, with 22 million customers, said in October that it planned to spend $3 billion on new equipment to upgrade its network. But details of the deals revealed Monday by Cingular's three major suppliers--Nokia, Siemens and Ericsson--put the value of the upgrade well in excess of $3.5 billion.
Cingular spokesman Peter Nilsson said Monday that he was not commenting on the financial terms. Details of the deals were not released by Cingular. Instead, in a hat trick of announcements starting with Nokia late Sunday night, each of the suppliers individually announced the amount of money and what type of equipment Cingular was buying from them.
Cingular and other carriers are looking for new ways to make money, as competition has beaten the price of a phone call to low levels. The carriers hope the faster networks will entice customers to use their phones for sending e-mail with picture attachments, downloading ring tones or playing games, for instance.
Nokia said it is selling Cingular more than $1 billion in high-speed wireless phone network equipment. Nokia, which said delivery of the equipment is expected by early 2002, described Monday's deal as the largest ever for its network equipment division.
Ericsson spokesman James Borup said Monday morning that Cingular will buy about $2 billion in high-speed cell phone equipment from the Swedish company sometime in the next three years. As in Nokia's case, Ericsson's deal with Cingular deal is "one of the largest ever for Ericsson in terms of network equipment," he said.
Siemens said in a separate release that Cingular would be buying about $500 million in gear, including cell phones. The company said the Cingular deal is the company's first major deal with a U.S. carrier.
Deals between Cingular, Nokia, Siemens and Ericcson had been expected since October, when Cingular said it would be spending $3 billion to rebuild its telephone network. Cingular said at the time that Nokia, Siemens and Ericsson would be the "primary suppliers" of the equipment. Cingular hopes to finish building the network by 2004.
But the total dollar figures in the deals unveiled Monday put Cingular's totals so far at $3.5 billion, conservatively, at least a half-billion dollars more than the amount Cingular said it would spend on Oct. 30. Nilsson said he had no comment.
"We're not providing terms of the deal," Nilsson said. "We're sticking to what the Oct. 30 announcement said."
Most carriers are building the networks in two stages. Carriers like Cingular plan to first install GPRS (General Packet Radio Service), which lets people access the Web at speeds of about 56kbps, or about six times faster than is possible now. The next phase, known as 3G, or third generation, involves adding more equipment so wireless users can get up to 144kbps speeds, the speed of a typical broadband connection.
Some of these networks are already running. Pieces of Cingular's GPRS network are available in Seattle, Las Vegas, North Carolina and South Carolina, coastal Georgia, and eastern Tennessee. The company plans to have the GPRS network available nationwide by 2004.
AT&T Wireless said its GPRS network is now in cities located in and around Seattle, Phoenix, Las Vegas, Detroit, Florida and Portland, Ore. The company expects to launch the rest of its national network by the end of next year. Nokia is helping to supply AT&T with the needed equipment. AT&T spokesman Ritch Blasi did not reveal how much Nokia network gear Ma Bell has purchased.
Last month, VoiceStream Wireless launched its nationwide GPRS network. It unveiled a new series of services, called "iStream," which lets people connect to the faster network and access their Microsoft Outlook and Lotus Notes e-mail programs. Customers will have to buy new phones to use the service, which will cost between $3 and $40 a month.